Advisers Face a Fiduciary Challenge When Discussing Alternatives to Trump Accounts

While Trump Accounts offer some benefits for early savings, investment advisers need to be cautious when recommending alternatives like 529 plans or Roth IRAs, as those suggestions could create fiduciary conflicts.

By Jeff Briskin

published 30 September 2025

in Features

A financial adviser goes over a young couple's finances in an office.

(Image credit: Getty Images)

One of the most talked-about provisions of the One Big Beautiful Bill (OBBB) is the Trump Account.

Available exclusively for the benefit of children under age 18, this account was originally supposed to be a super-tax-advantaged way for young people to save for college, a first home or to start a business.

The final watered-down product, however, more closely resembles a traditional IRA — only without the benefits of tax-deductible contributions.

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As these accounts become available starting in 2026, many clients with young children (and expectant parents) will be asking advisers questions about them:

How are they funded?
What do they invest in?
Are withdrawals taxed?
How do they stack up to other savings options?

In most cases, other vehicles offer superior tax benefits, higher contribution limits and greater portfolio customization.

Advisers shouldn't be afraid to make these comparisons. But they need to be very careful if the alternatives they recommend to a Trump Account would earn them fees or other compensation. Doing so in a haphazard way could put them in the SEC's fiduciary crosshairs.

Trump accounts: Basic facts

For children born in 2025, 2026, 2027 and 2028, the U.S. government will open a Trump Account for them with a $1,000 contribution.

Starting in 2026, any parent will also be able to establish an account for a child who is under age 18 anytime before the end of 2028.

Once established, parents and other individuals will be able to make after-tax contributions of up to an aggregated total of $5,000 per year.

On top of this limit, employers and qualified charitable institutions will be able to contribute $2,500 to a child's account. These contributions will not count as taxable income.

It's not clear at this point whether this is a lifetime or annual contribution limit.

All contributions will be invested in a single low-cost, broad stock market index fund or ETF.

Earnings will grow tax-deferred until the child can start withdrawing them in the year they turn 18.

Then what?

At this point, it appears that a Trump Account essentially becomes, for all intents and purposes, a traditional IRA.

Like traditional IRAs, withdrawals from Trump Accounts will be taxed as ordinary income. And, like IRAs, the child may be hit with a 10% early withdrawal penalty unless withdrawals are used to pay for qualified expenses, such as:

Higher education costs
The purchase of a first home
Expenses related to recovery from a federally declared disaster

Like an IRA, early withdrawal penalties will be waived once the account owner turns 59½. And, at the moment, it appears that annual required minimum distributions (RMDs) will be required if the account still has assets when the child turns 75.

Since contributions are made after-tax, it's not clear whether account owners will be able to withdraw contributed principal (not earnings) without tax consequences, especially if these contributions were made by someone other than the owner themselves.

What is it good for?

On the surface, the Trump Account looks like an easy way for parents to put away money for their children at an early age to give them a head start on saving for college or retirement.

But when you start comparing the Trump Account to other savings vehicles, its limitations stand out.

There are better college savings options

529 college savings plans allow parents, grandparents and others to make after-tax contributions up to a total aggregated lifetime contribution limit per account that varies by state (on average, it's about $402,000). In 30 states, a portion of 529 plan contributions is state-tax-deductible.

Contributions can be diversified across a mix of stock and bond funds, and all withdrawals are tax-free if they're used to pay for qualified educational expenses.

And these expenses aren't limited to college tuition.

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The OBBB now allows tax-free 529 plan withdrawals to pay for K-12 private school tuition, homeschooling expenses, tutoring costs, standardized test fees, educational therapies and post-secondary credentialing programs.

And if there's money left over in a 529 Plan, up to $35,000 in total can be rolled over into a tax-free Roth IRA established by the beneficiary.

Minor Roth IRAs are better retirement savings vehicles

Speaking of Roth IRAs, when a child starts earning their own income, their parents can establish a minor Roth IRA, also known as a custodial Roth IRA, that will allow them to contribute up to the amount the child earns or $7,000, whichever is lower.

The child takes ownership of the account when they turn 18, and any distributions they take after age 59½ will be totally tax-free. And, unlike traditional IRAs or Trump Accounts, RMDs are not mandatory for Roth IRA owners.

Even UGMAs/UTMAs may offer better tax benefits

Uniform Gifts/Transfers to Minors Accounts allow parents to contribute as much as they want to after taxes to establish these custodial trust accounts for their children.

Depending on the custodian, assets can be diversified across stocks, bonds, mutual funds and ETFs.

And while a portion of ordinary income and realized capital gains generated by earnings are taxable, investors (or advisers) can use tax-loss harvesting and strategic cost-basis step-up strategies to reduce investment taxes.

The risks of recommending Trump Account alternatives

Other than serving as a tax-deferred savings vehicle that can be funded as soon as a child is born, Trump Accounts offer few advantages over other kinds of savings accounts.

Investment advisers who agree with this opinion should feel free to express it to clients who ask about Trump Accounts, or express their opinions in public.

But if they recommend any of the alternatives mentioned above, they need to be very careful that their advice doesn't raise fiduciary red flags.

This is most likely to happen if, after hearing these recommendations, a client offers to pay the adviser to manage the investments in one or more of these Trump Account alternatives. Or if the adviser recommends their own managed solution.

In either scenario, the adviser's actions could be perceived as conflicted, since they might materially benefit from this advice.

And since an adviser's fee for managing these alternative accounts will probably be significantly higher than those charged by a Trump Account (whose annual fees cannot exceed 0.1% of the account balance), they may face a fiduciary quagmire in trying to explain how their recommendations are truly in their clients' best interests.

It's unclear whether the SEC will eventually provide guidance to help investment advisers navigate this fiduciary minefield.

So, until there's clarity, advisers may want to ask their firm's compliance officer to proactively develop their firm's rules of the road for guiding and documenting these kinds of comparative discussions.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Jeff Briskin is the marketing director for a Boston-area financial planning firm and principal of Briskin Consulting, which provides strategic, digital and content marketing services to asset managers, wealth management firms, TAMPs, trust companies and fintech firms. Jeff has more than 25 years of financial marketing experience with some of America’s largest mutual fund companies, banks and wealth management firms.